Statement of Cash Flows Using a Work Sheet—Indirect Method (Appendix) Wabash Cor
ID: 2432744 • Letter: S
Question
Statement of Cash Flows Using a Work Sheet—Indirect Method (Appendix)
Wabash Corp. just completed another successful year, as indicated by the following income statement:
Presented here are comparative balance sheets:
Other information is as follows:
Dividends of $350,000 were declared and paid during the year.
Operating expenses include $25,000 of depreciation.
Land was sold for its book value, and new plant and equipment were acquired for cash.
Part of the bank loan was repaid, and additional common stock was issued for cash.
The president has asked you some questions about the year's results. She is very impressed with the profit margin of 14% (net income divided by sales revenue). She is bothered, however, by the decline in the company's cash balance during the year. One of the conditions of the existing bank loan is that the company maintain a minimum cash balance of $100,000.
Required:
1. Using the format in the chapter's appendix, prepare a statement of cash flows work sheet. If an amount box does not require an entry, leave it blank.
2. Prepare a statement of cash flows for 2017 using the indirect method in the Operating Activities section. Use the minus sign to indicate net loss, cash payments, cash outflows, or decreases in cash.
3. During the year Wabash experienced a decrease in cash at the end of the year due to
Explanation / Answer
Cash flow indirect method
Cash flow from operating activities
Net income
350000
Adjustments to reconcile the net income
Depreciation expense
25000
Changes in current asset and liabilities
Increase in Inventory
-20000
accounts receivable decrease in
85000
Decrease in prepayments
10000
Increase in accounts payable
20000
Decrease in income tax payable
-35000
Decrease in accrued liabilities
-5000
80000
Cash flow from operating activities
430000
Cash flow from Investing activities
Equipment purchased
-250000
Equipment sold
Land sold
100000
Cash flow from Investing activities
-150000
Cash flow from Financing activities
Paid in capital in excess
Common stock
50000
Long term balnk loan payable
-50000
Dividend
-350000
Cash flow from Financing activities
-350000
Net Cash and cash equivalent
-70000
Add
Beginning cash and cash equivalent
210000
Ending cash and cash equivalent
140000
THANK YOU............
Cash flow indirect method
Cash flow from operating activities
Net income
350000
Adjustments to reconcile the net income
Depreciation expense
25000
Changes in current asset and liabilities
Increase in Inventory
-20000
accounts receivable decrease in
85000
Decrease in prepayments
10000
Increase in accounts payable
20000
Decrease in income tax payable
-35000
Decrease in accrued liabilities
-5000
80000
Cash flow from operating activities
430000
Cash flow from Investing activities
Equipment purchased
-250000
Equipment sold
Land sold
100000
Cash flow from Investing activities
-150000
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